Petromax enterprises uses a continuous review inventory, Ask an Expert

Management Studies

Petromax Enterprises uses a continuous review inventory control system for one of Its SKUs. The following information is available on the item. The firm operates 50 weeks in a year.

Demand = 50.000 units/year

Ordering cost = $35/order

Holding cost = $2/unit/year

Average lead time 3 weeks

Standard deviation of weekly demand = 125 units

a. What is the economic order quantity for this item?

b. If Perromax wants to provide a 90 percent cycle- service level, what should be the safety stock and the reorder point?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91702905

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